Commerzbank warns as crisis weighs on sales, loans

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Published: Aug 9, 2012 2:08 a.m. ET

Last Updated: Aug 9, 2012 2:10 a.m. ET

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FRANKFURT--Germany's Commerzbank AG CBK.XE Thursday said net profit in the second half will be lower than in the first six months, as challenging market conditions mute customer activity, weighing on revenue and putting continued pressure on the loan book.

The cautionary tone came despite a surge in second-quarter net profit, helped by the absence of Greek sovereign debt write-downs felt a year earlier, lower administrative costs and a better contribution from investments that offset higher loan-loss provisions. Net profit was 275 million euros ($336 million), up from EUR24 million a year earlier.

The bank also said that it had a cushion of EUR2.8 billion above European capital requirements at the end of June, up from EUR1.1 billion at the end of March, accomplished by reducing risk-weighted assets further, retaining earnings and improving the capital structure.

The bank cautioned of deteriorating market conditions and that it will speed up the restructuring of its private customer segment, which wasn't able to compensate for lower revenue by strict cost management in the second quarter. The result of a strategic review, which some fear could lead to branch closures, will be announced Nov. 8.

Quarterly operating profit was EUR451 million and Core Tier 1 capital ratio was 12.2%. That's in line with the bank's announcement at the end of July of operating profit of around EUR450 million and a Core Tier 1 ratio of around 12% of risk-weighted assets.

For the six-month period, net profit was EUR644 million and operating profit was EUR1.04 billion. It had guided to an operating profit of around EUR1 billion and a pretax profit of around EUR900 million.

Last year around this time, Commerzbank's second-quarter net profit was hampered by a EUR760 million impairment on Greek government bonds, which eroded net profit to EUR24 million and operating profit to a mere EUR55 million.

Commerzbank shares closed up EUR0.02, or 1.74%, at EUR1.28, outperforming both the German DAX and the Stoxx 600 Banks index. The shares have lost 38% over the past 12 months, cutting market value to EUR7.5 billion.

Corrections and Amplifications

This article was corrected at 06:57 GMT. The original misstated the quarterly Core Tier 1 capital ratio in the fifth paragraph. Quarterly Core Tier 1 capital ratio was 12.2%, not 12.1%.

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